Global Markets Compass Quarterly market and economic breakdown to help guide you in the right direction Winter 2025 | As of December 31, 2024 CIBC ASSET MANAGEMENT Table of contents Portfolio Solutions Research Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Market review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Summary in charts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Winter 2025 Global Markets Compass commentary—Trump 2. 0 drives Q4 market returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Our asset allocation views . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Economic review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Fixed income, currency and commodities markets . . . . . . . . . . . . . 16 Equity markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Asset allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Appendix – Index returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 About CIBC Asset Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 2 Global Markets Compass, Winter 2025 | CIBC ASSET MANAGEMENT Portfolio Solutions Research Forum The views of our Portfolio Solutions Research Forum help guide CIBC Asset Management and our partners by providing strategic asset allocation recommendations, as well as strategic and tactical investment oversight for CIBC managed solutions. Leslie Alba Head, Portfolio Solutions Total Investment Solutions Chair, Portfolio Solutions Research Forum David Wong CIO, Managing Director & Head Total Investment Solutions Michael Sager Managing Director & Head Multi-Asset & Currency Management Patrick Thillou Managing Director & Head Trading, Global Beta, Overlays and Outcome Management Total Investment Solutions Ohm Srinivasan Head of Manager Research & Alternative Investments US Private Wealth Management Philip Lee Executive Director Manager Research Total Investment Solutions Francis Thivierge Senior Portfolio Manager Multi Asset & Currency Management Gaurav Dhiman Portfolio Manager Global Fixed Income Crystal Maloney Head of Equity Research Alex Dyoujenko Director, Purpose Scores Total Investment Solutions Michael Keaveney Vice President Managed Solutions 3 Global Markets Compass, Winter 2025 | CIBC ASSET MANAGEMENT Market review Economic overview • Despite volatility in the last few trading days of 2024, global equity markets posted strong gains for the year. • The US presidential election drove strong US market sentiment as investors anticipated pro-business policies under the new Trump administration. • Outside of the US, most equity markets lagged due to threats of tariffs on US imports under the new Trump administration. Canadian equities held up relatively well, boosted by robust Shopify returns. • Emerging markets delivered the weakest returns as China—a large proportion of emerging markets equity—remains the largest target for proposed US import tariffs. Fixed income markets • 10-year US Treasury yields fell to a low of 3. 62% in September when the US Federal Reserve (the Fed) embarked on its first rate cut, causing a rally in bonds. However, this was short lived as the 10-year yield rose by over 100 basis points (bps) to end the year. While the Fed cut its key policy rate in each of the last three meetings of the year, it signaled a more hawkish tone going forward. • Within Canada, bond market returns were flat in Q4 but gained over 4% for the year following the Bank of Canada’s (BoC) rate cuts that outpaced those implemented by the Fed. Given the Fed’s slower pace of cuts and less dovish tone, bond markets in the US fell by 3% USD in the final quarter of the year but still managed small gains of 1. 3% USD for the year. High-yield bonds outperformed throughout the year, while short-term bonds outperformed longer terms. • The FTSE Canada Universe Bond Index rose 4. 2% CAD on the year, with gains seen in high-yield, short-term and government bonds for Q4 as well. Mid- and long-term bonds underperformed with negative Q4 returns, but all Canadian bond sectors managed positive returns for the year, led by double-digit gains among high-yield indices. Global Markets Compass, Winter 2025 | 4 CIBC ASSET MANAGEMENT Equities Canada • The BoC aggressively cut its key overnight interest rate in the second half of 2024, with five cuts totaling 175 bps, including two 50 bps cuts in Q4. The BoC was encouraged by slowing inflation, while the cuts helped push the S&P/ TSX Composite Index to 2024 gains of over 20% and set all-time highs in December. • Following a strong first half of 2024, the Canadian economy grew in Q3 at a slower pace, but with strong Year-over-Year (Y/Y) growth led by household and government spending. This was slightly offset by slowing business investment and exports. With an increase in labour force entrants, the Canadian unemployment rate edged higher to 6. 8% in November, an increase of 1% Y/Y and 2% since its 2022 lows. • As with other global indices, the S&P/TSX Composite Index was led higher by the information technology sector, which rose over 22% on the quarter and 38% in the year, while the financials sector gained over 30% in 2024. This was partly offset by the communication services sector, down over 19% in Q4, making it the only negative sector on the year (-21. 1%). US • US markets were buoyed by continued economic growth where technology gains driven by artificial intelligence, low unemployment, income growth, and strong retail sales were all important factors. • The S&P 500 index rose 2. 4% USD (9% CAD) in the fourth quarter, led by the consumer discretionary sector, which was propelled by shares of Tesla, which may be a strong beneficiary of lighter regulation under the Trump administration. Over the year, the index benefited from the performance of Magnificent 7 stocks such as Nvidia, which rose 171%. • In contrast small- and mid-cap stocks underperformed over the year, with the Russell 2000 Index still posting double-digit gains but less than half the returns of the large-cap S&P 500 index which gained 25% USD (36. 4% CAD) on the year following similar gains in 2023. • The materials sector was the only sector not to post gains in 2024, while eight sectors rose by at least 15% USD for the year. International • While global growth remained resilient, international economies had mixed results. The World Bank maintained a growth projection of 7% for India despite high inflation, while China’s GDP growth slowed since Q2, attributed to weakness in the real estate sector from higher borrowing costs. Germany is projected to return to growth in 2025 following negative GDP in 2023 and into Q4 2024, while Japan’s GDP also remained muted in 2024. • International equity markets struggled in local currency terms in Q4 but still managed double-digit gains for the year, as measured by the MSCI EAFE Index. The Nikkei 225 Index rose over 5% JPY (1. 9% CAD) in Q4 and nearly 20% JPY (17.2% CAD) for the year as Japan ended eight years of negative interest rates in the spring, but maintained ultra-low borrowing rates in an attempt to stimulate growth. International value stocks outperformed growth, led by the financials sector. Canadian investors holding international equities also benefited from a weaker Canadian dollar. • While emerging markets demonstrated relative weakness in Q4, driven by weakness in Chinese stocks, emerging markets outperformed developed non-US stocks, as measured by the MSCI EAFE Index, over the year. MSCI China delivered -1. 7% CAD in Q4, but over 30% CAD in 2024. The MSCI Taiwan Index rose over 10% CAD in the final quarter and over 47% CAD for the year. Conversely the MSCI Emerging Markets Latin America Index fell by over 10% CAD in Q4 and over 19% on the year. “EAFE®” is a registered trademark of MSCI Inc., used under license. Global Markets Compass, Winter 2025 | 5